Litigation and Trial - Max Kennerly : Philadelphia Trial Lawyer Max Kennerly : Business and Commercial Litigation : Civil Attorney : The Beasley Firm : Philadelphia Pennsylvania

The Supreme Court released its opinion in Bilski v. Kappos this morning, which tested the sufficiency of a "business method" patent relating to the hedging of risk in investments.

Four Justices wanted to scrap "business methods" patents altogether. Five wanted to scrap just the patent at issue here.

Given the complexity of the issues involved, I'm pleasantly surprised to report that the actual holding of the case can be summarized with just a few quotes:

Section 101 defines the subject matter that may be patented under the Patent Act:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

Section 101 thus specifies four independent categories of inventions or discoveries that are eligible for protection: processes, machines, manufactures, and compositions of matter. “In choosing such expansive terms . . . modified by the comprehensive ‘any,’ Congress plainly contemplated that the patent laws would be given wide scope.” Diamond v. Chakrabarty, 447 U. S. 303, 308 (1980).

Slip op., 4.

The Court’s precedents provide three specific exceptions to §101’s broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Chakrabarty, supra, at 309.

Slip op., 5.

In light of these precedents, it is clear that petitioners’ application is not a patentable “process.” Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: “Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.” 545 F. 3d, at 1013 (Rader, J., dissenting); see, e.g., D. Chorafas, Introduction to Derivative Financial Instruments 75–94 (2008); C. Stickney, R. Weil, K. Schipper, & J. Francis, Financial Accounting: An Introduction to Concepts, Methods, and Uses 581–582 (13th ed. 2010); S.Ross, R. Westerfield, & B. Jordan, Fundamentals of Corporate Finance 743–744 (8th ed. 2008). The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.

Slip op., 15.

And that's it: hedging is an "abstract idea," and thus not subject to patenting.

That is undoubtably the correct result; this same morning, Fred Wilson over at AVC gave some basic advice for startups on the concept of hedging. I doubt Fred ever read the patent at issue here, or ever read any paper or article based on the patent. Hedging is an abstract concept that can be applied to a particular situation, no different from the Ruy Lopez in chess or moonwalking.

But not everybody's happy, since the Supreme Court took the nice, clean rule established by the Federal Circuit in its opinion denying the patent, threw that rule out, and restored the old mess. Patent professors like Dennis Crouch at Patently-O are frustrated:

In general, the opinion offers no clarity or aid for those tasked with determining whether a particular innovation falls within Section 101. The opinion provides no new lines to be avoided. Rather, the outcome from the decision might be best stated as "business as usual."

Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.

By refusing to state any particular rule or categorical exclusion, the Court has almost certainly pushed Section 101 patent eligibility to the background in most patent prosecution and litigation.

Techies (and techie lawyers) are also similarly annoyed:

The Software Freedom Law Center, which supports open source licenses, lamented the ruling.

"The landscape of patent law has been a cluttered, dangerous mess for almost two decades," said Eben Moglen, Chairman of the Software Freedom Law Center. "The confusion and uncertainty behind today’s ruling guarantees that the issues involved in Bilski v. Kappos will have to return to the Supreme Court after much money has been wasted and much innovation obstructed."

These aren't merely theoretical considerations. Patents don't control what people are allowed to think, but they certainly control what people are allowed to do with what they think. Billions, potentially trillions, of dollars of revenue are dependent on the patent laws of the United States. Whole businesses live, die, and pursue or forgo opportunities based on those laws.

And, of course, every day, patent infringement lawsuits are filed, and millions of dollars are spent pursuing or defending those lawsuits. The issue is not one to be taken lightly.

Given the circumstances here — i.e., the abrupt and sporadic acceptance, and then rejection, of the patentability of some business methods by the Federal Circuit in the 1990s — it would have been better for the majority to have clearly reaffirmed the longstanding pre-1990s rule that business methods were not patentable, as the concurrence recommended.

The majority opinion and the concurrence are both worth reading; further, as the majority noted, "Students of patent law would be well advised to study [the] scholarly opinions" of the Federal Circuit in the case. Since patent law has just been made a bit messier again, it's a good idea to keep your mind limber.

Though I agree with the concurrence, the majority's reasoning isn't wrong per se. The problem, to me, is the philosophical underpinning of their interpretation.

Four of the majority's members' hesitation in going further was understandable:

It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.

Slip op., 9-10 (Justice Scalia chose not to join that part, so that language is only a plurality opinion). But I don't think the majority's overall reasoning stands up: 

The Court’s precedents provide three specific exceptions to §101’s broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Chakrabarty, supra, at 309. While these exceptions are not required by the statutory text, they are consistent with the notion that a patentable process must be “new and useful.” And, in any case, these exceptions have defined the reach of the statute as a matter of statutory stare decisis going back 150 years. See Le Roy v. Tatham, 14 How. 156, 174– 175 (1853). The concepts covered by these exceptions are “part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none.” Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U. S. 127, 130 (1948).

Slip op., 5.

The problem with this analysis is that the second sentence contradicts the first. There are plenty of "abstract ideas" that are "new and useful:" consider the Ruy Lopez and moonwalking. Neither of these ideas teaches a person how to make anything, as is the focus of the Patent Act; rather, they teach people how to do something in a "new and useful" way, much like business methods do. 

Are they patentable? There's no way to know beforehand with certainty, and so there's a chilling effect on businesses or individuals. As Justice Stevens opened his concurrence, "In the area of patents, it is especially important that the law remain stable and clear." For someone like me, who represents plaintiffs enforcing patents, stability and clarity help me evaluate whether or not to accept a potential client's case.

Unfortunately, although the law is a bit more stable than it could have been — the majority did, after all, affirm the denial of the patent — it's less clear than the Federal Circuit had made it.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I haven't seen Iron Man 2, but Robert Farley and Davida H. Isaacs have, and they've written a great column about the legal issues at the heart of the story, The Stark Reality of Defense Contracting:

Iron Man 2 is the most expensive movie ever made about an intellectual property dispute....

In the United States, inventors are supposed to profit from their creations, as emphasized in the original comics. But Iron Man 2 takes a different tack. While trying to fend off Vanko, Stark is pressured by the U.S. government to give up the secrets of the Iron Man suit. After Stark refuses a senator's demand that he relinquish his body-armor technology, the government forcibly takes it from him, only to turn it over to a competitor that then uses the technology to fulfill its own defense contract. Consciously or no, this echoes the real world; the United States government can take such actions with almost total legal impunity.

In real life, most inventors aren't trying to "privatize peace." Many just want to get a government contract. Their inventions are kept as trade secrets, like the Iron Man suit, or they are patented. (In the film, Pepper Potts, played by Gwyneth Paltrow, demands action from "patent attorneys," but Stark Industries obviously hadn't patented the technology, or else the government would already have access to the information needed to reproduce the armor.) It is not unheard of for a potential contractor to provide the government with product specifications, only to then watch the government award the contract to a competitor that has suddenly and suspiciously generated remarkably similar technology. For example, Crater Corporation charged that Lucent Technologies improperly used its tennis-inspired coupler to fulfill a Defense Department contract.

These inventors theoretically have their own superpower at their disposal: the Fifth Amendment's "Takings Clause," which requires compensation for government appropriation. But it has one weakness: the military and state secrets privilege, which has been invoked with increasing frequency in the past 25 years.

... [Courts] have treated the privilege as legal Kryptonite, dismissing inventors' lawsuits. In Iron Man 2, Stark's competitor Hammer could have immediately begun production after acquiring the Iron Man suit, insisting that it had generated the technology itself. Had Stark sued, the government could have claimed state-secrets privilege, protecting details of the contract and production design from Stark's lawyers. Stark would have been left without recourse to obtain the evidence needed to prove his case.

I would have quoted more, but for my respect of their intellectual property rights.

Indeed, in Crater Corp. v. Lucent Technologies, the United States officially intervened and tried to halt the case entirely, because, it asserted, "any information to be obtained in [discovery regarding the manufacture or use of the coupler by or on behalf of the United States] was protected by the state secrets privilege." The Court of Appeals for the Federal Circuit didn't rule on that claim, because it dismissed the case under 28 U.S.C. § 1498(a), which:

provides "an affirmative defense for applicable government contractors." Va. Panel Corp., 133 F.3d at 869, 45 USPQ2d at 1232. If a patented invention is used or manufactured for the government by a private party, that private party cannot be held liable for patent infringement. Trojan, Inc. v. Shat-R-Shield, Inc., 885 F.2d 854, 856, 12 USPQ2d 1132, 1134-35 (Fed.Cir.1989); W.L. Gore & Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275, 1282-83, 6 USPQ2d 1277, 1283-84 (Fed.Cir.1988).

And that's just what happened:

We affirm the district court's dismissal of Crater's patent infringement claims because there is no genuine issue of material fact that Lucent's use and manufacture of the allegedly infringing coupler was for the government. Because Lucent established its affirmative defense under 28 U.S.C. § 1498(a), Lucent's activities cannot be held to be infringing.

All's fair in love and war-for-profit.

Let's get back to the patent infringement versus trade secret issue.

Once Tony Stark invents his Iron Man suit, he has two legal options to protect his intellectual property: file for a patent or treat the suit as a trade secret. The law protects both patents and trade secrets, but in different ways.

With a patent, the inventor publicly discloses the invention by filing a patent. If the patent is granted, the inventor is granted exclusive legal domain over the use of the patent for a limited amount of time. If someone wants to build the same device, they can do so by simply reviewing the patent, but they will have to pay the inventor for the use or sale of that device. As a reward for making the instructions public, the inventor is granted a plethora of legal protections, such as the ability to file for injunctions against infringement, and to recover attorney's fees and treble damages in a lawsuit.

With a trade secret, the inventor is required to "take reasonable measures to keep the information secret." If they do that, and "the information derives independent economic value... from not being generally known to, and not being readily ascertainable through proper means by, the public," then federal law makes it a crime to misappropriate that information. Here's an example of the types of things that can get you indicted, such as under the Economic Espionage Act:

Taking the allegations in the Superseding Indictment as true, the defendant engineers were to design tire manufacturing equipment for "off the road" (OTR) tires for their employer Wyko. The defendants formed a plan to take unauthorized photographs of Goodyear's OTR manufacturing equipment under the guise of evaluating Wyko equipment. While at the Goodyear facility, defendant Roberts falsely told the security guard that he had signed a nondisclosure agreement within the past year. The defendants then falsely stated to the Goodyear engineer that they were there to evaluate Wyko-made equipment. Defendant Howley used his cellular telephone to take photographs of Goodyear's OTR manufacturing equipment while defendant Roberts acted as lookout. Defendant Howley emailed the photographs to his work email account and then sent them to defendant Roberts' work email account. Defendant Roberts emailed the photographs to Wyko employees in England.

With a trade secret, state common law allows compensatory relief, through typically not attorney's fees or treble damages. Similarly, it's harder to get an injunction for misuse of a trade secret than for infringement of a patent. (Here's an example in the Second Circuit of misappropriation being clear, but there being no clear risk of "irreparable harm," and so no injunction.)

So, Tony Stark gets to choose: disclose the details of the invention in a patent and correspondingly get superior civil (i.e. monetary) relief if someone copies it, or try to keep the invention secret himself and hope that criminal law dissuades people from stealing it.

In his case it's a no-brainer. He has no intent to sell the technology and he'd lose his advantage if others had it, too. A trade secret it is.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Via Blawgletter (and a couple other sources), the whole eleven-judge Federal Circuit issued a rare en banc opinion that held, 9-2, that Harvard, MIT, the Whitehead Institute for Biomedical Research, and Ariad Pharmaceuticals, Inc. couldn't, well, I'll let Barry Barnett explain:

Ariad, MIT, the Whitehead Institute, and Harvard claimed that Eli Lilly infringed their patent on ways to reduce the symptoms of some diseases by causing a protein -- Nuclear Factor kappaB* -- to behave.  The problem (as Blawgletter gleans from the judges' five opinions) arises from the fact that the inventors seem not to have figured out how to suppress symptom-causing NF-kB activity.  They appear simply to have discovered that NF-kB existed and guessed that somehow bringing it to heel would help sick people feel better.

Ariad, MIT, Whitehead, and Harvard urged that the first paragraph of section 12 requires a patent to say only enough to "enable" an in-the-know person to build something that makes NF-kB curtail its hurtful conduct inside human cells.

I knew some of the folks at those places were smart, but I never realized they were so smart they didn't have to actually invent anything to get a patent. Instead, they can just describe a problem and then claim a patent over someone else's solution.

To call the case "significant" is an understatement. Among those submitting amicus briefs to the Federal Circuit were:

• The University of California
• Federal Circuit Bar Association
• Monsanto Company
• GlaxoSmithKline
• Microsoft Corporation
• Google Inc.
• Verizon Communications, Inc.

...and a dozen other schools and technology, pharmaceutical, and research companies who make—or pay—billions of dollars related to broad patents that claim to cover discoveries, but not necessarily inventions, in scientific fields.

The Federal Circuit, however, is even smarter still:

[A] separate requirement to describe one’s invention is basic to patent law. Every patent must describe an invention. It is part of the quid pro quo of a patent; one describes an invention, and, if the law’s other requirements are met, one obtains a patent. The specification must then, of course, describe how to make and use the invention (i.e., enable it), but that is a different task. A description of the claimed invention allows the United States Patent and Trademark Office (“PTO”) to examine applications effectively; courts to understand the invention, determine compliance with the statute, and to construe the claims; and the public to understand and improve upon the invention and to avoid the claimed boundaries of the patentee’s exclusive rights.

[...]

Perhaps there is little difference in some fields between describing an invention and enabling one to make and use it, but that is not always true of certain inventions, including chemical and chemical-like inventions. Thus, although written description and enablement often rise and fall together, requiring a written description of the invention plays a vital role in curtailing claims that do not require undue experimentation to make and use, and thus satisfy enablement, but that have not been invented, and thus cannot be described. For example, a propyl or butyl compound may be made by a process analogous to a disclosed methyl compound, but, in the absence of a statement that the inventor invented propyl and butyl compounds, such compounds have not been described and are not entitled to a patent.

Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., pp. 12, 26.

Specific to the patent at issue,

The ’516 patent discloses no working or even prophetic examples of methods that reduce NF-κB activity, and no completed syntheses of any of the molecules prophesized to be capable of reducing NF-κB activity. The state of the art at the time of filing was primitive and uncertain, leaving Ariad with an insufficient supply of prior art knowledge with which to fill the gaping holes in its disclosure. See Capon, 418 F.3d at 1358 (“It is well-recognized that in the unpredictable fields of science, it is appropriate to recognize the variability in the science in determining the scope of the coverage to which the inventor is entitled.”).

Whatever thin thread of support a jury might find in the decoy-molecule hypothetical simply cannot bear the weight of the vast scope of these generic claims. ... Here, the specification at best describes decoy molecule structures and hypothesizes with no accompanying description that they could be used to reduce NF-κB activity. Yet the asserted claims are far broader.

Thus, the patent was invalid.

The Federal Circuit's opinion, though, goes much farther than the facts of the case, with a broad rule for future "discovery" patents:

Ariad complains that the doctrine disadvantages universities to the extent that basic research cannot be patented. But the patent law has always been directed to the “useful Arts,” U.S. Const. art. I, § 8, cl. 8, meaning inventions with a practical use, see Brenner v. Manson, 383 U.S. 519, 532-36 (1966). Much university research relates to basic research, including research into scientific principles and mechanisms of action, see, e.g., Rochester, 358 F.3d 916, and universities may not have the resources or inclination to work out the practical implications of all such research, i.e., finding and identifying compounds able to affect the mechanism discovered. That is no failure of the law’s interpretation, but its intention. Patents are not awarded for academic theories, no matter how groundbreaking or necessary to the later patentable inventions of others. “[A] patent is not a hunting license. It is not a reward for the search, but compensation for its successful conclusion.” Id. at 930 n.10 (quoting Brenner, 383 U.S. at 536). Requiring a written description of the invention limits patent protection to those who actually perform the difficult work of “invention”—that is, conceive of the complete and final invention with all its claimed limitations—and disclose the fruits of that effort to the public.

That research hypotheses do not qualify for patent protection possibly results in some loss of incentive, although Ariad presents no evidence of any discernable impact on the pace of innovation or the number of patents obtained by universities. But claims to research plans also impose costs on downstream research, discouraging later invention. The goal is to get the right balance, and the written description doctrine does so by giving the incentive to actual invention and not “attempt[s] to preempt the future before it has arrived.” Fiers, 984 F.2d at 1171. As this court has repeatedly stated, the purpose of the written description requirement is to “ensure that the scope of the right to exclude, as set forth in the claims, does not overreach the scope of the inventor’s contribution to the field of art as described in the patent specification.” Rochester, 358 F.3d at 920 (quoting Reiffin v. Microsoft Corp., 214 F.3d 1342, 1345 (Fed. Cir. 2000)). It is part of the quid pro quo of the patent grant and ensures that the public receives a meaningful disclosure in exchange for being excluded from practicing an invention for a period of time. Enzo, 323 F.3d at 970.

Id., pp. 28-29 (emphases added).

I think the Federal Circuit made the right decision both on the statute and on the policy—there's a substantial consensus today that our patent system is unjustly overprotective in many areas, including biochemical research—but the decision is not without some costs. As the Circuit recognized with the "loss of incentive" part above, it was already hard for scientists to justify to non-scientist corporate managers or school trustees the value of basic research without referencing the financial upside of patentable discoveries. Now that will be even harder, since the financial upside is less lucrative and less secure.

That said, basic research progressed well enough for hundreds of years without the over-patenting we have today, and even a small increase in government funding could likely make up for any new losses due to reduced patentability. Thus, on the whole, the case is a victory for law and for science.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Fred Wilson links to his partner Brad Burnham's post, "We need an independent invention defense to minimize the damage of aggressive patent trolls:"

I know of no case where the engineers in one of our companies were aware of the patents that are now being used to attack them. The moral rightness of this screams at me. If, as an engineer focused on solving a problem, I happened to come up with an idea that is in some way similar to yours, then that in itself should suggest that it was obvious and not patentable. Unfortunately, that does not really help. There, the burden of proof is still on the startup and it is still smarter to settle than to burn precious capital on a defense.

If, on the other hand, the troll was required to show the startup had some prior knowledge of their technology, the burden would be shifted to the attacker, and this blatant abuse would come to a grinding halt. If you believe as I do that innovation is key to social progress, please support patent reform. It is a complicated issue, but an independent invention defense is an obvious place to start.

(Emphasis mine; keep reading to see why.)

Though I sympathize with Brad's concerns — patent infringement litigation is both high stakes and notoriously expensive, and thus risky and burdensome even for defendants likely to prevail at trial — I have a couple issues with an independent invention defense. 

First, the defense already exists to some extent in the form of differing damages for "infringement" compared to "willful infringement." If the plaintiff cannot prove at least "objective recklessness" — which is quite hard to do in the wake of In Re Seagate Technology, since the defendant has no affirmative duty to avoid infringement — then the plaintiff cannot recover treble damages or attorneys' fees. The stakes are thus lower in genuine "independent invention" cases.

Second, an independent invention defense would discourage individuals and businesses from doing an adequate patent search before investing resources into novel solutions. One of the primary reasons we have a public patenting process (rather than merely protection of private trade secrets) is to make inventions easily available to the public for use. How many times would the wheel have been reinvented if it had been kept secret? Though frustrating to businesses, from a societal standpoint patent licensing is generally preferable to the redundant investment of time, effort and money into solving problems with known solutions.

Third, an independent invention defense would be ripe for abuse. Independent invention is already a defense to to a willful patent infringement claim; making independent innovation a complete defense would give defendants an even greater incentive to manufacture "evidence" showing their "independent" invention. Worse, genuine invention is often quite messy; the independent invention defense could thus perversely protect only those defendants who from the start knew to create a trail of "evidence."

That's not to say we don't have problems with our patent system. We do. I just don't think an independent invention defense is the way to go.

So let's talk about the part of Brad's post I emphasized: obviousness and the burden of proof.

A recurring theme in the comments to Brad's post and Fred's post is the complaint that many patented "inventions," particularly in the Silicon Valley industries, are not particularly inventive. Patent law is supposed to guard against this problem. Indeed, the most common defense in patent suits is a counterclaim by the defendant that the patent is invalid because it is too obvious.

35 U.S.C. § 103 forbids patents where "the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." The Supreme Court has explained the analysis as such:

Under § 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background the obviousness or nonobviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented.

More pertinent here is how a finding of "obviousness" is the only tool courts have to mitigate the high stakes and high expense of patent infringement cases with questionable, but not outright dubious, merit.

Finding "obviousness" as a matter of law is a nuclear option; it requires the court dismiss the case, simultaneously creating precedent barring the defendant from any future litigation on the patent in the future and creating a basis for any current licensees to stop payment to the defendant. Courts' hesitation to use that nuclear option — particularly given the standards governing summary judgment and courts' unfamiliarity with the state of innovation in highly technical industries — is understandable.

So what to do?

Change the burdens.

It's not a new idea; employment-discrimination cases routinely apply the McDonnell-Douglas burden-shifting framework at summary judgment.

Right now, in terms of "obviousness," a court has two options:

1. Find the patent "obvious" as a matter of law, thereby blowing up the case and invalidating the patent;
2. Leave "obviousness" up to the jury, where the defendant has the burden of proving the patent is "obvious."

As Brad complains, #2 may be a hollow remedy.

So why not add another option? Why not allow the court to put the burden of nonobviousness upon the plaintiff if the defendant shows, pre-trial, a "cogent and compelling" argument that the patent was obvious? ("Congent and compelling" isn't foreign to courts either; such a showing is required in securities fraud cases under Tellabs.)

A court could further mitigate the pre-trial risk to the defendant by ordering bifurcation of the trial; i.e., first there's a trial on "obviousness," and then, if the patent is "nonobvious," there's a trial on infringement. Adding some element of fee-shifting — e.g., a plaintiff who loses the "obviousness" trial has to pay the trial fees of the defendant — would create a market for contingent fee defense of patent infringement suits, and thereby mitigate the "burn[ing] of precious capital ..."

Just a thought.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

As Patently-O reports this morning, 

The Supreme Court recently rejected Medela's petition for certiorari arguing that the conclusion of obviousness should be made by a judge rather than a lay jury.

In the wake of Medela's failure, Acushnet (maker of Titleist) is now asking the Supreme Court to hold that "a court reviewing a jury's [obviousness] verdicts must always independently render its own legal conclusion regardless of whether one or all of the jury's underlying findings are accepted as adequately supported by the evidence." Taking that a step-further, Acushnet argues that a jury's verdict on the question of obviousness should be seen as "entirely advisory as to the ultimate legal conclusion." 

Medela was intriguing — and Acushnet would be even more intriguing — because many believed that the Supreme Court's unanimous opinion in KSR International Co. v. Teleflex, Inc. gave the courts even more power to dispose of patent infringement cases prior to reaching a jury trial by making the court involved even further in determining the "nonobviousness"* of new inventions.

The denial of certiorari in Medela, however, implied the opposite, thereby preserving the primary role of juries — to resolve factual disputes — in patent cases.  A denial of certiorari in Acushnet would be a big win for plaintiffs, since it would empower them to argue that the district court can only grant summary judgment if there is no way the jury could find the patented invention "nonobvious."

On the merits of the petition, Acushnet's argument is incompatible with the civil litigation and jury trial system envisioned by the Federal Rules of Civil Procedure. We don't demand jury service from ordinary citizens, particularly the weeks of jury service required for patent trials, just so they can render "advisory opinions." We demand jury service to evaluate the material facts over which there is a "genuine" dispute.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Oh, Ashcroft v. Iqbal, will we ever stop blogging about you?

The newest online debate pits the class action defense lawyers at Drug & Device Law against University of Pennsylvania Law School Professor Stephen Burbank at PENNumbra, the online supplement to UPenn's Law Review.

Beck and Herrmann open with a defense of Iqbal on several grounds, including:

[C]ourts have no legitimate basis for favoring plaintiffs when interpreting pleading standards. A just system does not pick sides in advance, but instead establishes neutral rules. We reject the normative view that it is somehow “better” to let unmeritorious cases proceed than to risk that meritorious cases will be dismissed. Either way represents error, and neither error is inherently better than the other. Indeed, given the enormous transaction costs that litigation entails, Type II errors (false negatives) are probably preferable to Type I errors (false positives) from a purely economic perspective.

From a "purely economic perspective" it is better if corporations stop wrongfully causing damage in the first place, which they will only do if they have an economic incentive like the threat of legal liability.

But there's a bigger problem with Beck and Herrmann's argument.

It is an "error" when a court dismisses a meritorious case. It is a particularly unjust, unfair, and avoidable "error" when a court dismisses a meritorious case prior to any discovery.

It is not, however, an "error" for a court to refuse to dismiss a case that may be unmeritorious.

Why not? Because the case may be meritorious and, if it is not, the defendant has four more opportunities to resolve the case favorably by testing the merits of plaintiff's claim: judgment on the pleadings, summary judgment, trial, and post-trial relief. That is to say, even after the motion to dismiss, Plaintiff's claims will be assessed, re-assessed, re-re-assessed, then re-re-re-assessed. Then there's an appeal to re-re-re-re-assess each and every element of plaintiff's claims and each and every element of plaintiff's damages.

When a court declines to dismiss an unmeritorious case, there is ample room for error-correction down the road to ensure plaintiff's claims have merit. It's why we have a civil justice system: to provide a thorough airing and evaluation of disputes.

When a court dismisses a meritorious case, however, the only error-correction is a single appeal that will be evaluated under the same unfair anti-plaintiff standard established by Iqbal.

Beck and Herrmann have it exactly backwards: there is "no legitimate basis" for not favoring plaintiffs when interpreting pleading standards. Their "neutral" interpretation of pleading rules is not "neutral" at all, but rather a "normative view" that plaintiffs are not entitled to the same error-correcting procedures to which defendants are entitled.

A "just system" wouldn't pick defendant's side in advance.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Business Week points us to the major cases.

As Litigation & Trial is a legal, rather than a business, blog, I'm going to take their list of cases but replace their description of each with the actual legal issue at stake, along with links to SCOTUSWiki, which hosts all of the relevant briefs for your reading pleasure:

Bilski v. Kappos: Whether a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (”machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101 and whether the “machine-or-transformation” test for patent eligibility, contradicts Congressional intent that patents protect “method[s] of doing business” in 35 U.S.C. § 273.

Free Enterprise Fund v. Public Company Accounting Oversight Board, et al.: Whether the Sarbanes-Oxley Act is consistent with separation-of-powers principles - as the Public Company Accounting Oversight Board is overseen by the Securities and Exchange Commission, which is in turn overseen by the President - or contrary to the Appointments Clause of the Constitution, as the PCAOB members are appointed by the SEC.

Black et al. v. United States: Whether the “honest services” clause of 18 U.S.C. § 1346 applies in cases where the jury did not find - nor did the district court instruct them that they had to find - that the defendants “reasonably contemplated identifiable economic harm,” and if the defendants’ reversal claim is preserved for review after they objected to the government’s request for a special verdict.

American Needle Inc. v. NFL, et al.: Whether NFLP, the NFL, and the teams functioned as a “single entity” when granting the company an exclusive headwear license and therefore could not violate Section 1 of the Sherman Act, 15 U.S.C. 1, which requires proof of collective action involving “separate entities.”

United Student Aid Funds, Inc. v. Espinosa: Where a debtor declares to discharge a student loan debt in his Chapter 13 bankruptcy plan, has the debtor satisfied the due process requirements of Mullane v. Cent. Hanover Bank & Trust Co, and does the fact that the debtor failed to initiate an adversary proceeding render the enforceability of the discharge order under 11 U.S.C. 1327(a)inapplicable?

Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Company: Can a state legislature properly prohibit the federal courts from using the class action device for state law claims?

Hemi Group, LLC, et al v. City of New York: Whether city government meets the Racketeer Influenced and Corrupt Organizations Act standing requirement that a plaintiff be directly injured in its “business or property” by alleging non commercial injury resulting from non payment of taxes by non litigant third parties.

Graham County Soil and Water Conservation Dist v. ex rel. Wilson: Whether federal courts have jurisdiction over False Claims Act suits based on revelations in administrative reports or audits issued by state or local governments, as opposed to the federal government.

Stay tuned for more discussion of each in upcoming posts.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The AmLaw Daily reports:

When news broke Wednesday that guitar virtuoso Joe Satriani's copyright suit against the band Coldplay had been settled, the Litigation Daily raced to Pacer to download the documents. After all, it's not every day that a copyright dispute between an aging guitar god and one of the biggest rock bands on the planet settles. (Granted, it's a bit of a stretch to call Coldplay a "rock" band.) But it turns out that the settlement is as opaque as a Coldplay lyrics sheet.

Satriani filed suit in December 2008, alleging that Coldplay's monster hit of 2008, "Viva La Vida," ripped off "substantial, original portions" of his 2004 song "If I Could Fly." (To compare the two, scroll to the bottom of this RollingStone.com post.)

On Monday, Los Angeles federal district court judge Dean Pregerson issued an order dismissing Satriani's suit. We were hard-pressed, however, to find details of the settlement between Satriani and the band in the judge's one-page filing. The only nugget: Each side will cover its own costs and attorneys' fees.

(YouTube also has an excellent analysis of the two songs by a guitar instructor.)

I must point out a technical note. The order for dismissal says:

Each party shall bear its own costs and attorney fees.

For those of you who can read English, you may be surprised to learn that the above language does not mean that each side will cover its own costs and attorney fees. Indeed, as part of the settlement, it's possible that Coldplay agreed to pay all of Satriani's costs and fees.

Here's why: in actions for copyright infringement (like actions for patent infringement and employment discrimination), a plaintiff can recover, as part of their damages, the costs and attorney's fees incurred in bringing the suit. In such a situation, once the trial was concluded favorably for the plaintiff, the plaintiff would submit a petition for fees to the court, after which the Court would evaluate the reasonableness of the fees and then award those fees which were appropriate.

In some cases, the parties settle the merits of the action, but expressly reserve the issue of costs and attorneys' fees for the Court to decide, after which the case is over. All the language in the Satriani v. Coldplay cases means is that the parties have decided to resolve the costs and fees issue themselves, rather than letting the court rule on it. It's likely Coldplay is indeed paying them, since otherwise Satrinani wouldn't recover anything on balance after paying his attorneys.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link